Best Practice Month End Close Checklist (Excel Template)

Month End Close Checklist Excel TemplateIn one of our recent webinars, FloQast CEO Mike Whitmire discussed standardizing reconciliations and documentation templates as one tactic for simplifying your month-end close. You might be thinking, “Great idea! But when am I going to find time to do that?”

Don’t worry, we got you. To get you off to a running start, we’re going to cover a list of common close items and provide you with a checklist template. From there you can customize it as you see fit.

This is just a sampling of items from each account – you can also down our complete month end close checklist Excel template.

Cash and cash equivalents

Every business has cash so this is an easy one. Here’s a sample of potential tasks related to cash:

  • Post all applicable cash receipts
  • Perform bank reconciliation by agreeing ending balance per ERP to bank statement
  • Review outstanding check list for checks aged 60+ days.
  • Review prior month undeposited funds and agree to deposits cleared in the month

Restricted cash

Also common is restricted cash; that is, cash that is earmarked for a particular use.

  • Confirm balance sheet classification of restricted cash. If expected to expire in less than 1 yr, should be current.

Short-term investments

Many businesses hold short-term assets that aren’t as liquid as cash. These are usually held by a custodian or other third party. Often times a company plans to dispose of these assets in less than one year.

  • Obtain investment statements
  • Verify reasonableness of calculated realized and unrealized gain/loss

Accounts receivable

Sales made on credit and still unpaid will wait in accounts receivable (“AR”). There are a lot of elements to the sales process so naturally there will be a lot of closing procedures. And because sales is a heavily scrutinized area by auditors, you’ll want to be sure that AR is in good shape.

  • Prepare, post and distribute all remaining invoices. Upon completion, verify all invoices properly posted to the subledger & notify revenue team
  • Review accounts receivable aging for any unapplied credits
  • Rollforward prior period Master Billing Schedule and update for contracts closed in the month
  • Generate and review AR aging for non-standard terms; calculate current period Days Sales Outstanding (DSOs) to monitor aging performance
  • Identify significant account balances past due and document collection status as part of the ADA analysis

Inventories

Inventories are a key account for any business that sells physical merchandise. There’s tons of activity in inventory accounts, especially at the end of the month when sales teams are trying to hit monthly goals.

  • Perform perpetual inventory subledger review to ensure all goods activity confirmations were properly posted to the GL. Investigate any errors as needed and resolve in a timely manner
  • Review perpetual inventory listing for reasonableness (high quantities, high dollars, etc.)
  • Meet with CFO, Controller & VP of Operations for monthly inventory reserve discussion. Update inventory reserve calculation, as needed
  • Determine if any excess, obsolete or planned end-of-life (EOL) inventory exists that needs to be written off or fully reserved

Prepaid expenses

Whenever a business pays for an expense in advance, its value is recognized as an asset. As soon as a period of time expires, the appropriate portion of the asset comes off the books and the expense is recognized.

  • Add current period new prepaid additions
  • Review expense coding & calculate current period amortization
  • Remove fully amortized items from the schedule
  • Generate list of current period GL detail and review whether monthly amortization expense is in accordance with internal prepaid policy

PP&E

Property, plant & equipment (aka fixed assets, aka long-term assets) are assets that a company will keep in service for longer than one year. This is a diverse account with many different kinds of assets as well as a variety of depreciation methods used to recognize the devaluation of these long-term assets over their useful lives

  • Generate fixed assets additions listing from the system & randomly review invoices to verify proper asset classification
  • Create any manual fixed assets in the system, as necessary
  • Inquire with department managers on fixed disposals
  • Update useful lives as necessary
  • Run depreciation in the system, review results for any significant errors

Goodwill

Goodwill represents the excess of the purchase price of an acquisition over the fair value of the underlying net tangible and intangible assets. Usually any closing tasks would not recur monthly, rather on an annual or as-needed.

  • Perform an annual goodwill impairment test whenever events or changes in circumstance indicate the carrying value of goodwill may not be recoverable
  • Review results with Controller to determine if an impairment gain/loss needs to be recorded

Accounts payable

Every business has bills to pay and most of the time these short-term obligations come with a grace period to remit payment to the vendor. Similar to its asset counterpart, accounts receivable, accounts payable is closely scrutinized by auditors who are trying to ensure that the ending AP balance is complete and not understated.

  • Perform 3-way match (purchase order/receipt/invoice) and prepare check signature packets
  • Request Statement of Accounts (SOAs) from all applicable vendors
  • Generate and review AP Aging for non-standard terms
  • Review AP aging for any unapplied credits
  • Review reconciliation of Open PO’s with FP&A

Accrued liabilities

Obligations that are not appropriate for accounts payable are often included in accrued liabilities. This could be anything from compensation related liabilities to special services to other long-term arrangements. Like AP, auditors will look closely at that these accounts to ensure they are complete.

  • Email various department heads for any one-time, significant estimates for unvouchered services rendered to date
  • Record accrued bonus.
  • Confirm reasonableness of outstanding service periods by cross referencing to invoices posted in AP

Deferred revenue

A business must that receives cash in advance for goods delivered or services rendered at a future date must record deferred revenue. As this is satisfied, the liability comes off the books and revenue is recognized.

  • Perform deferred revenue acceptance analysis by cross referencing customer acceptance criteria to current period standard contracts in order to ascertain whether revenue recognition criteria has been satisfied.
  • Rollforward prior period “Deferred Revenue by Customer” report. Ensure beginning balance of current period accurately agrees to ending balance of prior period and capture all relevant deferred revenue transactions within the GL. Review for any non-routine transactions as defined within the Deferred Revenue Memo
  • Generate “Billings by Customer” report
  • Using current period revenue and current period billings, perform rollforward by customer and review balances for unusual items

SOX

Good news, if you’re not a public company, you can skip this section! If your team is part of a public company, grab the template below, it’s full of great reminders.

Reporting

If you have regular reporting obligations, either monthly or quarterly, this becomes a key area for you. If your reporting is less frequent then many of these tasks are likely to be performed on an annual or semi-annual basis.

  • Perform debt covenant calculations
  • Perform gross margin analysis and review with Director of Finance and CFO
  • Compile all relevant monthly metrics for CEO package
  • Generate final financial statements for CFO (BS, IS and Cash Flow)
  • Create audit committee slides and review with CFO for distribution to auditors and Board

Tax

Every business has its own tax obligations to consider. Income, property, sales and payroll are all common and should be considered as regulations require remittance to the proper authority. Here’s just an example of some closing tasks; yours should be customized to meet your needs.

  • Review annual tax returns with CFO and file prior to 9/15 deadline
  • File each applicable state return for the current period
  • Review tax provision with Controller and record necessary tax provision JEV

 

Don’t forget this is just a taste of our checklist template, built from our collective expertise helping hundreds of companies streamline and organize their close process. Download a free copy for your team and customize it as necessary. Enjoy!

 

Download Our Best Practice Close Checklist Template

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